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Antenuptial Agreements in Tennessee Require Full Disclosure

February 9, 2012 by The McKellar Law Firm, PLLC

The case of Stancil v. Stancil, No. E2011-00099-COA-R3-CV, held that an antenuptial agreement without adequate disclosure and a spouse who was misled into signing was not valid and unenforceable. Tennessee divorce attorneys should note the disclosure requirements reviewed in this case.

The testimony showed that before the parties married, Husband stated Wife needed to sign a document allowing her to "not be on his property" due to her bad credit and his need to obtain future loans. Wife testified that Husband stated that although the document was similar to a prenuptial agreement, its only purpose was for him to secure a loan. Wife also testified that Husband stated he would omit a parcel of property, which would serve the purpose of invalidating the agreement. The property Husband claimed to be omitting he referred to as "St. Elmo", which Wife believed to be a street name. However, in the agreement she signed, a property at Twelfth Avenue was listed. That property was located in the St. Elmo district in Chattanooga, although those words never appeared in the document. Wife had a witness testify who corroborated Husband's explanation of the credit score and St. Elmo theories. The attorney who prepared the agreement testified, stating Wife had opportunity to ask him questions and he had received a letter from Husband's attorney that he would be liable to Husband if the agreement was invalidated. The trial court held the antenuptial agreement was valid. Wife appealed.

T.C.A. ยง 36-3-501 covers antenuptial agreements, and the Tennessee Supreme Court has stated that the spouse seeking enforcement must show by a preponderance of evidence that a full and fair disclosure of the nature, extent, and value of his or her holdings was provided to the spouse seeking to avoid the agreement or that disclosure was unnecessary because the spouse seeking to avoid the agreement had independent knowledge of the full extent of the value of the holdings.

Here, the Husband failed to meet that burden. Statements by the Wife and witnesses contradicted the Husband's version of events in leaving out a piece of property to invalidate the agreement on purpose. Also, Wife did not know she was signing away her rights to alimony under the agreement. Wife believed she was signing an agreement which only assisted Husband in securing loans. The Husband's bad faith undermines the foundation of the agreement. Along with misleading Wife and the bad faith, the Court found there was not full disclosure by Husband.

The necessity of full disclosure and good faith depends on the exercising of candor and good faith, which leads to a leveling of the playing field in bargaining power. The parties entering the agreement should do so with full knowledge of the other person's holdings. The factors considered for full and fair disclosure are: "the relative sophistication of the parties; the apparent fairness or unfairness of the substantive terms of the agreement; and finally, any other circumstances unique to the parties and their specific situation." Here, Wife was clearly at a disadvantage and was misled by Husband. Therefore, the trial court erred in upholding the antenuptial agreement and the Appeals court reversed, finding the agreement invalid.